Square : Shareholder Letter

investors.squareup.com

Q3 2021 Shareholder Letter

Featured Seller: SoFi Stadium in Inglewood, CA

Highlights

In the third quarter of 2021, we generated gross profit of $1.13 billion, up 43% year over year. Our Seller ecosystem generated gross profit of $606 million, up 48% year over year. Cash App generated gross profit of $512 million, up 33% year over year.

We continued to grow upmarket with more complex sellers: Our mid-marketsellers experienced strong growth in the third quarter of 2021, growing gross profit nearly twice as fast as the overall Seller business on a two-yearCAGR basis.

During the third quarter of 2021, we launched Cash App Pay, enabling a new commerce experience for Cash App customers and creating a powerful integration between our Cash App and Seller ecosystems.

third quarter financial metrics

GROSS PROFIT

ADJUSTED EBITDA

$1.13 Billion+43% YoY

$233 Million

$1.14B

$1.13B

$360M

$964M

$804M

$794M

$236M

$233M

$181M

$185M

2yr CAGR

50%

45%

56%

57%

51%

38%

YoY Growth

59%

52%

79%

91%

43%

56%

NA

267%

28%

YoY

Growth

Q3

Q4

Q1

Q2

Q3

Q3

Q4

Q1

Q2

Q3

2020

2021

2020

2021

SELLER GROSS PROFIT

CASH APP GROSS PROFIT

NET INCOME (LOSS)*

$606 Million+48% YoY

$512 Million+33% YoY

$0 Million

$585M

$606M

$546M

*Attributable to common stockholders

$495M

$512M

$294M

$409M $427M

$468M

$385M

$377M

$204M

2yr CAGR

19%

20%

25%

30%

29%

163%

131%

142%

128%

104%

$37M

$39M

YoY Growth

12%

13%

32%

85%

48%

212%

162%

171%

94%

33%

$0M

Q3

Q4

Q1

Q2

Q3

Q3

Q4

Q1

Q2

Q3

Q3

Q4

Q1

Q2

Q3

2020

2021

2020

2021

2020

2021

In the third quarter of 2021, total net revenue was $3.84 billion, up 27% year over year, and, excluding bitcoin revenue, total net revenue was $2.03 billion, up 45% year over year.

The following items affected net income (loss) per share during the respective periods. In the fourth quarter of 2020, we recognized a gain of $274 million related to equity investments, driven primarily by a gain of $255 million as a result of the mark-to-market valuation of our investment in DoorDash. In the first quarter of 2021, we recognized a loss of $29 million related to the mark-to-market valuation of our investment in DoorDash as well as a $20 million bitcoin impairment. In the second quarter of 2021, we recognized a $77 million gain on our equity investments and a $45 million bitcoin impairment. In the third quarter of 2021, we recognized a loss of $7 million driven by the adjustment to the revaluation of equity investments as well as a $6 million bitcoin impairment.

A reconciliation of non-GAAP financial measures used in this letter to their nearest GAAP equivalents is provided at the end of this letter.

The compound annual growth rate (CAGR) is the mean annual growth rate over a specified time period. Given the variability in year-over-year comparisons due to COVID-19, we believe using two-year CAGRs from 2019 to 2021 better reflects underlying growth trends.

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ON THE COVER

Square is the exclusive point-of-sale (POS), payments, software, and merchant services provider for the new SoFi Stadium in Inglewood, CA. SoFi Stadium uses Square Point of Sale, Square Register, Square Terminal, Square Team Management, Catalog API, Orders API, and Payments API.

CASH APP HIGHLIGHT

We introduced Cash App Pay,

1. mobile-friendlypayment solution that allows Cash App customers to pay at Square sellers by simply scanning a QR code online or in person, leading to an improved checkout experience.

November 4, 2021

To Our Shareholders

We delivered strong growth at scale during the third quarter of 2021. Gross profit grew 43% year over year to $1.13 billion, which was 51% on a two-year compound annual growth rate (CAGR) basis. In our Seller ecosystem, gross profit was $606 million, up 48% year over year and 29% on a two-year CAGR basis. Our Cash App ecosystem delivered gross profit of $512 million, an increase of 33% year over year and 104% on a two-year CAGR basis. In August, we entered into an agreement to acquire Afterpay, a global buy now, pay later platform with more than 16 million consumers and approximately 100,000 merchants as of June 2021. Through this transaction, we plan to unite two complementary businesses with a shared focus on economic empowerment and financial inclusion. We believe the combination will more deeply connect our Seller and Cash App ecosystems, accelerate our strategic priorities, and allow us to deliver even more compelling products and services for consumers and merchants.

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1. "What Is Invoice Processing," March 2019, G2.

seller ecosystem

Enhancing our ecosystem of products

During the third quarter, we enhanced our Square Invoices product to help sellers more efficiently run their businesses and serve their customers. Square Invoices enables sellers with physical and remote operations like professional services, retailers, and home and repair to easily bill clients and get paid quickly, with more than three out of four Square Invoices getting paid within a day vs. the industry average of 25 days for small businesses.¹ Whether it be online, in person, or from a phone with a credit card, Square Invoices is built to simplify the payment process for customers and help sellers get paid faster while saving them time. Square Invoices now allows sellers to also accept Automatic Clearing House (ACH) bank transfer payments, which have a low processing fee, making them an attractive option for merchants with higher-ticket purchases. In August, we introduced Square Invoices Plus, a new paid software subscription offering designed for larger businesses that need help managing complex operations. Compared to its free tier, Square Invoices Plus provides more advanced features that enable sellers to invoice faster and streamline multiple client project workflows at once through tools like custom templates and milestone-based payment schedules. Square Invoices has experienced strong growth, processing $12 billion in GPV over the last 12 months, up nearly 2x from two years ago.

Growing up-market

We continued to grow up-market by attracting larger, more complex sellers while also helping smaller sellers to grow. Mid-market sellers value Square's ecosystem, as they need vertical-specific features, customer-relationship management tools, and access to our developer platform. Our mid-market sellers experienced strong growth in the third quarter of 2021, growing gross profit nearly twice as fast as the overall Seller business on a two-year CAGR basis. Mid- market Seller GPV represented 37% of total Seller GPV, compared to 28% two years ago.

$12B

Square Invoices has experienced strong growth, processing $12 billion in GPV over the last 12 months.

~2x

up approximately 2x from two years ago.

seller gpv mix by seller size

		$41.7B
	$28.8B	$15.5B	>$500K
$27.5B	Annualized GPV
$7.7B	$8.8B	$12.2B	$125K-$500K
$7.9B	$8.7B	Annualized GPV
$12.0B	$11.3B	$14.0B	<$125K
Annualized GPV

28%	31%	37%	Percent Mid-market
Sellers
2019	2020	2021
Q3	Q3	Q3

We determine seller size based on annualized GPV during the applicable quarter. A mid-market seller generates more than $500,000 in annualized GPV.

square q3 2021 4

1. "Means of payment and currency in circulation" November - December 2020, Banque de France.

In September, we announced we had been selected as the exclusive point-of-sale (POS), payments, software, and merchant services provider for the new SoFi Stadium, home to the Los Angeles Chargers and Los Angeles Rams, and Hollywood Park. We believe our ability to offer larger sellers rich data and real-time insights is a differentiated value proposition. By using Square, SoFi Stadium is able to better understand trends around top-selling items and busiest purchasing times for all concessions, bars, and hawkers, which empowers its team to make dynamic decisions to optimize staffing, inventory, and promotions. We believe our partnership with SoFi Stadium serves as a testament to how we are now equipped to enable unique commerce experiences and support the needs of complex multi-purpose venue sellers. As we continue to grow up-market, we have also partnered with other large venues that need contactless payment and order-ahead capability like the Calgary Flames stadiums and Area15, an experiential retail and entertainment complex.

Expanding globally

We remain focused on our international strategy of achieving product parity globally, investing further into brand awareness, and launching

in new markets. During the third quarter, we introduced several highly requested products in countries outside the U.S. We launched Square Marketing in the UK, Australia, and Canada, as well as Square Loyalty in the UK, providing sellers with fully integrated solutions that help retain and reengage more customers. In September, we introduced Square Register and Square Card in Canada, bringing sellers a contactless new way to sell, run their businesses, manage cash flow, and access their sales proceeds instantly.

During the third quarter, we further expanded in Europe by entering France with an ecosystem of omnichannel products and services. France has the second-largest card payments market in Europe, a flourishing small business environment, and a fast-growing eCommerce sector. The country has also recently seen an increase in contactless payments, with one in two French citizens saying they have been paying more often with contactless cards since the start of the pandemic.¹ As French businesses continue adapting to these shifts in consumer behavior, we believe Square is well positioned to provide innovative, omnichannel solutions that meet sellers and their customers wherever they are.

To coincide with our launch in France during the third quarter, we introduced a multi-channel brand marketing campaign focused on increasing awareness of Square's brand and value proposition in the country.

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